SGX, SEL. Temasek, GIC, MOF, CPF – caught in a tangled web?

by Leong Sze Hian

I refer to the article “A loathsome deal that should be given bargepole treatment” (The Sydney Morning Herald”, Oct 29).

What struck me like a bolt of lightning when I read the article, was the following-

  • “When you add up the arms and agencies with holdings and cross-holdings in the exchange, the Singapore government owns more than 30 per cent of the SGX”
  • “The state’s sovereign investment arm, Temasek Holdings, has a big stake in the exchange”
  • “Temasek is basically owned by the Ministry of Finance. The regulator of the exchange is the Monetary Authority of Singapore (MAS), which doubles as the central bank”


  • “Immediately, there are legitimate perceptions of a conflict of interest as one government instrumentality is supposed to be having oversight of the stock exchange which, in turn, is required to deliver a healthy return to investors, including the government. It is into this carefully confected fiefdom that our securities exchange is being foisted”

Why are there such complications in the ownership of a supposedly private entity? From public sources, it seems like SEL Holdings, a special purpose vehicle under Temasek seems to be holding the SGX stocks belonging to the Financial Sector Development Fund, a fund that MAS administers to develop financial sector talent.(SEL is SGX’s largest shareholder with 249,991,184 shares or 23.45 per cent, valued at about $2.4 billion)

This raised a few question, namely –

  1. why are the Ministry of Finance and MAS both stakeholders of 25% of SGX?
  2. Does this mean that SGX is partially Government? Are there any stock exchanges in the world that have such arrangements?
  3. Is MAS or any government body allowed to exercise voting rights on it’s initial 25 per cent stake in SGX stocks? If not, why not?
  4. If the Ministry of Finance and MAS have decided to use a private entity to hold the SGX shares, why was a government linked company selected? Would it not be cleaner to use an entirely private entity?

As I understand that MAS’s SGX holdings are used to fund the Financial Sector Development Fund (Source:, how is the fund utilized? How many schemes are there in the financial sector development fund? In this regard, how many jobs for Singaporeans have been created? How are the incentives administered? Are there any review and control mechanisms? How much and what proportion of the fund disbursed have gone to foreign companies? There should be transparency on this matter.

Given the conflicts of interest that have now been raised in the international media, in the light of the proposed acquisition of the Australian Stock Exchange by SGX, I would like to suggest that MAS consider selling its SGX stake and return the money to the Singapore Government or back into our national reserves.

In so doing, there may be greater accountability and transparency, and less international media scrutiny on the conflicts of interest that are being raised. In this regard, so long as perceived conflicts of interest remain, it may continue to hinder Singapore’s development and partnerships with foreign institutions, like ASX, Yale University, University of Warwick, etc.

On a related matter, the Government has been issuing gross debt by way of non-marketable Government securities to the Central Provident Fund (CPF) to match the 2.5 and 4 per cent interest on CPF accounts, as part of the Singapore Government Securities (SGS) programme.

The Government invests the proceeds raised through this issuance in foreign assets through the Government Investment Corporation (GIC). Since the Government also make injections into Temasek as well as equity transfers, like SEL, could there be a situation now whereby CPF liabilities may be in excess of the assets from which they are meant to be satisfied in the first place?

In conclusion I would like to cite some figures from the Department of Statistics’ Singapore Yearbook of Statistics 2010.

According to the book, the amount of CPF due to members has grown by 89 percent, from $88 billion to $167 billion from 1999 to 2009. Around the same time, Singapore’s public debt, which is entirely domestic, grew by 132 percent from $126 billion to $292 billion from 1999 to 2009.


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